The International Monetary Fund (IMF) said on Thursday Tanzania’s economic conditions remain stable, with economic growth estimated at about 6 percent, inflation at under 5 percent, an adequate level of foreign reserves, and manageable public debt.
IMF said in the period ahead, a robust and decisive set of policies will be critical to increase private sector investment, job creation, and support high economic growth and increase resilience against risks.
The latest economic assessment came after an IMF team led by Mr. Enrique Gelbard visited Tanzania from February 20 to March 4, 2020 to hold discussions with on the 2020 Article IV Consultation with Tanzanian officials, including Dr. Philip Mpango, Minister of Finance and Planning, Professor Florens Luoga, Governor of the Bank of Tanzania, other senior government officials, and representatives of the business and banking sectors and development partners.
“The discussions centered on measures to mobilize domestic revenue, resolve government arrears on VAT refunds and expenditures, increase spending in education and health while improving the efficiency of such spending as well as that of public investment projects, remove barriers and regulations affecting the business climate, and build skills in the labor force,” Mr. Gelbard said in a statement.
According to his team,“the pace of economic activity appears to have increased in recent months prompted by higher public investment, a rebound in exports, and an increase in credit to the private sector”.
“As a result, real GDP growth is estimated to be close to 6 percent, with activity buoyant in the construction and mining sectors. Other economic indicators point to a benign economic environment, with annual inflation at 3.7 percent, a stable exchange rate, foreign exchange reserves equivalent to near 5 months of imports, and public debt at below 40 percent of GDP.
“Prudent fiscal and monetary policies have delivered economic stability. To sustain these gains, increase private investment, and create jobs, there is a pressing need to proceed with targeted economic reforms”.
Mr. Gelbard said tax reforms are needed to improve the business climate and increase government revenues.
On the government spending, the IMF team recommended the implementation of planned measures to clear the backlog of expenditure arrears, account for them on a timely basis, and prevent the accumulation of new ones.
IMF said this will be essential to improve businesses’ cash flows, ensure that bank loans are paid back on time, and sustain economic activity.
“In addition, spending on health and education will need to be scaled up in coming years while ensuring quality of education and medical services and addressing key infrastructure gaps. Such expenditures will need to be carefully designed and prioritized in order to reap potential benefits in terms of better social conditions and high rates of economic growth”.
IMF said Tanzania’s financial system remains stable, adding that the authorities are also planning to proceed with measures to further reduce non-performing loans and improve banking supervision to protect banks’ soundness.
“To lower the costs of borrowing and improve access to credit, broadening the pool of acceptable collateral, improving the framework for credit information, and tackling judicial bottlenecks for the recovery of unpaid loans will be particularly important,” IMF added.
IMF said the economic prospects also depend on “enhancing the attractiveness for investing and producing in Tanzania and increasing the skills of the labor force”.